Qantas share price nosedives as profit falls by 90pc
SHARES in Australian airline Qantas, which is headed by Dubliner Alan Joyce, plunged nearly 19pc yesterday after the airline signalled that full-year profits for 2012 are likely to be 90pc lower than during 2011.
Qantas said it expects underlying pre-tax profit for the 12 months to the end of this month to be between A$50m (€39m) and A$100m (€78m).
That compares with the A$552m (€432m) it generated in the previous financial year. Qantas has blamed the deterioration in global aviation operating conditions due to events in Europe, as well as the airline's highest ever fuel bill and substantial capacity increases in its domestic market.
"We have taken decisive action to mitigate losses in Qantas International by withdrawing from loss-making routes, reducing capital investment, and transforming Qantas engineering," said Mr Joyce, who launched a major five-year transformation programme last August.
Mr Joyce added that, while the transformation programme could result in one-off costs of up to A$380m, half of which is as a result of non-cash items, the airline would benefit in the long-term from increased efficiency and competitiveness.
Qantas could lose its investment-grade credit rating at Standard & Poor's following the profit warning, said National Australia Bank.
"It's bleeding," said Peter Esho, chief market strategist at City Index in Sydney, a provider of equities, bonds and currency trading.
"It's very disappointing, especially the extent of the decline for the international business."
Mr Joyce's comments came as Abu Dhabi-based airline Etihad confirmed that it has snapped up almost a 4pc stake in Qantas rival Virgin Australia, the country's second biggest carrier.
Etihad already has strong ties with Virgin Australia, with the airlines feeding traffic to each other via Abu Dhabi. Etihad's move to buy the stake in Virgin Australia comes just weeks after Etihad said it had bought nearly 3pc of Aer Lingus.
Etihad said yesterday that its equity investment in Virgin Australia "significantly strengthens" their existing partnership.
(Additional reporting - Bloomberg)